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intermediate accounting

Intermediate Accounting Volume 2 4th Edition Kin Lo, George Fisher - Solutions

A company reported $350,000 of pension expense in its income statement. The balance sheet showed that the pension liability increased by $20,000 over the year. No amounts were recorded in other comprehensive income for the pension plan for the year.Required:How much cash was paid to the pension
A company has a defined benefit pension liability of $600,000 at the beginning of the year. The company contributes $3,800,000 to the pension during the year and records a pension expense of $3,600,000.Required:Determine the value of the defined benefit pension liability prior to fair value
Niagara Inns provides a modest defined benefit pension for its employees. At the end of the current fiscal year, which ended on December 31, the pension plan supplied Niagara with information about the pension, which is summarized in the following tables:The company did not have any past service
A company’s defined benefit pension plan incurs a current service cost of $2,200,000. Expected income on the pension plan’s assets amounted to $8,700,000, while actual income was $8,800,000. The interest on the pension obligation was $9,500,000, which matched the actuarial estimates. No past
Current service cost for a defined benefit pension plan amounted to $6,800,000. This pension plan’s assets generated $5,500,000 of income, which exceeded expectations by $500,000. Pension obligations incurred an interest cost of $4,800,000, which was above expectations by $200,000. During the
Mika Imports Ltd. provided the following pension plan information:Required:a. Calculate the expected value of the plan assets on December 31, 2021. b. Calculate the actual rate of return on plan assets earned in 2021. c. Prepare the journal entry to account for the deviation between the
At the beginning of the current year, a pension has assets of $45,600,000 and accrued benefit obligation of $57,500,000. During the year, the sponsor recorded $3,200,000 in pension expense and contributed $5,000,000 to the pension plan. At the end of the year, the plan assets had a fair value of
PEP Corporation has a defined benefit pension plan. As of January 1, the following balances exist:For the year ended December 31, the current service cost as determined by an appropriate actuarial cost method was $330,000. Improvements in benefits created a past service cost of $800,000. A change
Jaxxen Exports Ltd. provided the following pension plan information:Required:a. Calculate the expected value of the obligation on December 31, 2021. b. Prepare the journal entry to account for the deviation between the expected and actual value of the plan obligation at year-end. Present value
On December 31, 2019, the pension trust for Taj Singh Consulting Corp. (TSC) made a settlement payment of $450,000 to a recently terminated employee of TSC. The accrued benefit obligation pertaining to the terminated employee was $500,000.Required:Assume that the journal entries relating to the
Sam’s Golden Lab Corp. (SGL) maintains a defined benefit pension plan for its employees. On January 1, 2019, SGL finalized the sale of a business segment to Gretta’s Great Kittens Ltd. (GGK). Terms of the sale required SGL’s pension trust to pay $1,600,000 to GGK’s pension trust, to provide
Koffee Corporation provides its employees with a defined benefit pension plan. As of January 1, the following balances exist:For the year ended December 31, the current service cost as determined by an appropriate actuarial cost method was $570,000. A negotiated curtailment of the pension plan
The following tables are the reports of the pension trustee and pension actuary for Macpherson Massage Corp., which started the defined benefit pension plan at the beginning of 2018:Required: a. Prepare the journal entries for Macpherson’s pension plan in 2018. Record each item of pension
The following tables are the reports of the pension trustee and pension actuary for Timmins Industries, which started the defined benefit pension plan at the beginning of 2018:Required:Compute the pension expense and the amount of OCI for the two years. Pension trustee report Opening assets,
The following tables are the reports of the pension trustee and pension actuary for Golf is Good Inc., which started the defined benefit pension plan at the beginning of 2018:Required:a. Prepare the journal entries for Golf is Good’s pension plan in 2018. Record each item of pension expense and
Muskoka Canoes has had a defined benefit pension plan for three decades. Two years ago, the company improved the benefits at a cost of $2,800,000.Pension plan assets were $84,000,000 while pension obligations were $76,000,000 at the beginning of the year.For the current year, Muskoka’s pension
Belle Fragrances Inc. provided the following pension plan information:Required:a. Calculate the expected value of the plan assets on December 31, 2021. b. Approximate the actual rate of return earned on plan assets in 2021. c. Prepare the journal entry to account for the deviation between
Zachary Motors Corp. provided the following pension plan information:Required:a. Calculate the expected value of the obligation on December 31, 2021.b. Prepare the journal entry to account for the deviation between the expected and actual value of the plan obligation at year-end. Present value of
The actuarial valuation and accounting for defined benefit pension plans involve a number of different estimates. For each of the following changes in assumptions, identify the likely effect on the amount of pension expense in the current period (increase, decrease, or no effect). For this
The actuarial valuation and accounting for defined benefit pension plans involves a number of different estimates. For each of the following changes in assumptions, identify the likely effect on the indicated items at the end of the current year (increase, decrease, or no effect). Assume that the
Changing Assumptions Ltd. has the following details related to its defined benefit pension plan as at December 31, 2019:The actuarial obligation represents the present value of a single benefit payment of $1,400,000 that is due on December 31, 2025, discounted at an interest rate of 10%; that is,
Aegis Air Conditioning Company has three pension plans for three groups of employees: production, service, and administration. Information for the three plans is as follows:Required:Provide an excerpt of Aegis’s balance sheet showing the presentation of its pension plans. Pension assets Pension
As of January 1, 2019, Microbyte Computer Company began a defined benefit pension plan that covers all 300 of its employees. Employment levels have remained constant and are expected to remain so in the future. Prior to 2019, rather than having a defined benefit plan, the company had a defined
Brockstone Masons’ balance sheet shows a net defined benefit liability of $1,790,000. Relating to this amount are pension assets of $5,450,000 and pension obligations of $7,240,000. At the beginning of the year, pension assets were $4,900,000 while pension obligations were $5,500,000. For the
Dovetail Furnishings produces quality household furniture. The company has only one defined benefit pension plan, which covers its 30 carpenters. The company has completed its accounting for the year and closed its books. The draft financial statements show a defined benefit asset of $25,000,000.
DB Company operates a defined benefit pension plan. Until January 1, 2017, DB Company had a defined contribution plan that had been retroactively changed to a defined benefit plan. The plan was on this date underfunded by $1,000,000. DB Company has a December 31 year-end.On January 1, 2019,
Corus Manufacturing Ltd. has a defined benefit pension plan that covers its production employees. On September 1, 2008, Corus initiated this plan and had immediately contributed $12 million toward covering the costs of the plan because the plan provided for retroactive benefits. The actuary valued
Dayton Products Ltd. has a separate pension plan for its management. This pension plan was put in place on January 1, 2010. The plan initiation created a pension obligation of $3 million. However, only $1 million was put into the plan initially. On January 1, 2020, the company improved the benefits
Generous Co. Ltd. (Gen) operates a defined benefit pension plan that offers its employees an annual retirement income based on years of service and average of the final five years’ earnings prior to retirement. On January 1, 2019, Gen improved the pension benefits by increasing the
Cornwall has a defined benefit pension plan. The company’s balance sheet shows a defined benefit asset of $650,000 at year-end. This balance was composed of $22,800,000 of assets and $22,150,000 of pension obligations. During the year, the company contributed $7,500,000 to the pension, while
The following financial statement was prepared by employees of Walters Corporation. InstructionsIdentify and discuss the weaknesses in classification and disclosure in the single-step income statement above. You should
The financial statements of P&G are presented in Appendix 5B. The company’s complete annual report, including the notes to the financial statements, can be accessed at the book’s companion website, www.wiley.com/college/kieso.InstructionsRefer to P&G’s financial statements and the
Charlie Brown, controller for Kelly Corporation, is preparing the company’s income statement at year end. He notes that the company lost a considerable sum on the sale of some equipment it had decided to replace. Since the company has sold equipment routinely in the past, Brown knows the losses
Bobek Inc. has recently reported steadily increasing income. The company reported income of $20,000 in 2011, $25,000 in 2012, and $30,000 in 2013. A number of market analysts have recommended that investors buy the stock because they expect the steady growth in income to continue. Bobek is
O’Malley Corporation was incorporated and began business on January 1, 2014. It has been successful and now requires a bank loan for additional working capital to finance expansion. The bank has requested an audited income statement for the year 2014. The accountant for O’Malley Corporation
Wade Corp. has 150,000 shares of common stock outstanding. In 2014, the company reports income from continuing operations before income tax of $1,210,000. Additional transactions not considered in the $1,210,000 are as follows. 1. In 2014, Wade Corp. sold equipment for $40,000. The machine
Presented below is a combined single-step income and retained earnings statement for Nerwin Company for 2014. Additional facts are as follows. 1. “Selling, general, and
The following account balances were included in the trial balance of Twain Corporation at June 30, 2014. The Retained Earnings account had a balance of $337,000 at July 1, 2013. There are 80,000 shares of common stock
Maher Inc. reported income from continuing operations before taxes during 2014 of $790,000. Additional transactions occurring in 2014 but not considered in the $790,000 are as follows. 1. The corporation experienced an uninsured flood loss (extraordinary) in the amount of $90,000 during the
Presented below is the trial balance of Thompson Corporation at December 31, 2014. A physical count of inventory on December 31 resulted in an inventory amount of $64,000; thus, cost of goods sold
At December 31, 2013, Shiga Naoya Corporation had the following stock outstanding.10% cumulative preferred stock, $100 par, 107,500 shares $10,750,000Common stock, $5 par, 4,000,000 shares
The following are selected ledger accounts of Spock Corporation at December 31, 2014. Spock’s effective tax rate on all items is 34%. A physical inventory indicates that the ending inventory is
The stockholders’ equity section of Tkachuk Corporation appears below as of December 31, 2014. Net income for 2014 reflects a total effective tax rate of 34%. Included in the net income figure is
Presented below is information related to Ivan Calderon Corp. for the year 2014. Instructions (a) Prepare a multiple-step income statement for 2014. Assume that 60,000 shares of common stock are outstanding. (b)
Presented below are selected ledger accounts of Tucker Corporation as of December 31, 2014.Cash
Elgin Company had the following shareholders’ equity account balances on December 31, 2021:During 2022, the following transactions occurred:i. May 1: Elgin resold 800 of the treasury shares at $48 per share.ii. December 30: The board of directors declared cash dividends of $2 per share payable on
Select transactions and other information pertaining to Bedford Whale Watching Ltd. (BWW) are detailed below. Facts: a. BWW is domiciled in Bedford, Nova Scotia, and all purchases and sales are made in Nova Scotia. b. The HST rate in Nova Scotia is 15%. c. The balances in
The following is an extract from the balance sheet of Zach’s Fashion Inc. as at December 31, 2018:The company did not declare dividends in 2018.On October 31, 2019, Zach’s declared the stipulated dividends, including arrears, on both classes of preferred shares payable on December 1, 2019, to
The following is an extract from the balance sheet of Belle Beauty World Ltd. as at December 31, 2020:The company did not declare dividends in either 2019 or 2020.On October 31, 2021, Belle declared the stipulated dividends, including arrears, on both classes of preferred shares payable on December
Select transactions and other information pertaining to Anne Greene Ltd. (AGL) are detailed below. Facts: a. AGL is domiciled in Vancouver, British Columbia, and all purchases and sales are made in BC. b. The PST rate in BC is 7%. The GST rate is 5%. c. The balances in AGL’s
Select transactions and other information pertaining to Flat and Fertile Inc. (FFI) are detailed below.Facts: a. FFI is domiciled in Saskatoon, Saskatchewan, and all purchases and sales are made in Saskatchewan. b. The PST rate in Saskatchewan is 6%. The GST rate is 5%. c. The
Gail Fisher signed a five-year franchise agreement that gave her the exclusive rights to sell Yummy Yoghurt products in Cloverdale, British Columbia. The terms of the agreement require Gail to pay the franchisor an ongoing royalty of 5% of net sales and contribute 2.5% to the sales and marketing
On January 1, 2020, Zoe Robinson signed a 10-year franchise agreement that gave her the exclusive rights to sell Exclaim donuts in Halifax, Nova Scotia. The terms of the agreement required Zoe to pay the franchisor $30,000 upon signing the agreement and an ongoing royalty of 7% of net annual sales
On May 1, 2020, St. John’s Brew Supplies Inc. borrowed US$140,000 from its bank. St. John’s year-end is December 31, 2020. Exchange rates were as follows:Required:Prepare the required journal entries to record receipt of the loan proceeds and for any adjustments required at year-end. Ignore the
On December 15, 2020, Edmonton Horticulture Society (EHS) received supplies on account costing US$5,000 from a vendor in Washington. EHS, whose year-end is December 31, 2020, paid the account in full on January 3, 2021. Exchange rates were as follows:Required:Assume that EHS expenses supplies when
In 2020, Surinder’s Cycles Inc. sold 2,500 mountain bikes. For the first time, Surinder offered an in-store, no-charge, two-year warranty on each bike sold. Company management estimates that the average cost of providing the warranty is $5 per unit in the first year of coverage and $7 per unit in
The text identified three primary methods of offering awards under customer loyalty programs: 1. The company offers awards that it supplies itself. 2. The business offers awards supplied by an outside party. 3. The firm offers its customers a choice of receiving awards from its own
I Love Debt Inc. is in the process of acquiring another business. In light of the acquisition, shareholders are currently re-evaluating the appropriateness of the firm’s capital structure (the types of and relative levels of debt and equity). The two proposals being contemplated are detailed
A number of independent situations are set out below. The underlined entity is the reporting entity. 1. Montreal Pool and Skeet Corp.’s debt to equity ratio is 1.6:1, based on its draft financial statements for the year ended December 31, 2019. This leverage ratio exceeds the 1.5:1 maximum
a. Provide two reasons why companies may be motivated to keep debt off the balance sheet.b. Give three examples of obligations that IFRS now requires to be reported on the balance sheet when this was previously not the case.
Australian Balloon Rides Ltd. issues $4,000,000 of five-year, 4% bonds dated January 1, 2018. Interest is payable on January 1 and July 1 each year. The proceeds realized from the issue were the $4,200,000 sales price less the $20,000 fee charged by Balloon’s lawyers. Balloon’s year-end is
A list of liabilities follows. For each item, indicate by using the letter F that it is a financial liability or N that it is a non-financial liability. For obligations that are non-financial in nature, briefly explain why they do not meet the criteria of a financial liability. Item Liability 1.
What are the three criteria of a liability? Describe how trade accounts payable meet each of the criteria.
a. Explain what provisions are. b. Explain what financial liabilities are and how they differ from non-financial liabilities. c. Provide three examples of financial liabilities and three examples of non-financial liabilities.
A list of liabilities follows. For each item, indicate by using the letter C that it will be reported as a current liability, N that it will be reported as a non-current liability, or B that it potentially can be reported as either or both a current and non-current liability. For obligations that
a. Identify the three broad categories of liabilities. b. Explain how each of these three classes of liabilities is initially measured. c. Explain how each of these three classes of liabilities is subsequently measured.
Select transactions and other information pertaining to Best City in the World Inc. (BCW) are detailed below. Facts: a. BCW is domiciled in Charlottetown, Prince Edward Island, and all purchases and sales are made in PEI. b. The HST rate in PEI is 15%. c. The balances in BCW’s
Build a Deck Inc. (BaD) enters into a contract to construct six decks adjacent to a commercial building. The purchaser has agreed to pay $5,000 for each deck (total $30,000). The terms of the contract call for a 40% deposit ($2,000 per deck) at time of contract signing and payment of the balance
In an effort to stimulate lagging sales of its XLT converter, Rchris Enterprises Corp. implemented a manufacturer’s rebate program at the beginning of 2020. Customers that purchased an XLT converter during the year were entitled to a $50 rebate providing that they submitted an application that
On January 1, 2018, GFF Transmission Services Co. issued a $20,000, non-interest bearing note, due on January 1, 2019, in exchange for a custom-built computer system. The fair value of the computer system is not easily determinable. The market rate of interest for similar transactions is 4%.
On July 1, 2020, XXT Satellite Services Ltd. purchased an automobile for $40,000. The company paid $10,000 cash and issued a $30,000 note due on April 1, 2021, for the balance. The 4% annual interest rate on the note, which approximates the market rate of interest for similar transactions, is
North Vancouver Laundry (NVL) recently hired Fred as its payable clerk, a position that has been vacant for two months. While the other accounting staff have taken care of the “must do’s,” there are a number of transactions that have not yet been recorded:November 15, 2020—NVL purchases
On December 1, 2018, Joy Vasek Importers Inc. borrowed US$1,000,000 from its bank. The loan is payable in full on July 1, 2019. Interest is payable each month end at 5% per annum. Pertinent exchange rates in 2018 follow: Required: Prepare the required journal entries to record receipt of
Ranjit was recently hired by Montreal Express Inc. (MEI) to assist its payable clerk in bringing the accounts up to date. Ranjit was asked to record the following transactions: August 15, 2020—MEI purchases a new inventory monitoring system. MEI issues a $6,000 non-interest bearing note
Explain how a long-term loan maturing within one year of the balance sheet date is reported in the financial statements, assuming that the company intends to renew the liability for a further five years.
Explain how a non-current obligation in default is reported in the financial statements.
GHF Computer Systems Inc. maintains office equipment under contract. The contracts are for labour only; customers must reimburse GHF for parts. GHF’s rate schedule follows: GHF’s 2018 sales of maintenance agreements is set out below:Required:Assuming that sales occurred evenly throughout
HF Magazines Corp. sells three-year magazine subscriptions for $180 cash each. The cost of producing and delivering each magazine is $2 paid in cash at the time of delivery. HF’s sales activity for the year follows: ■ On January 1, 2020, HF sells 10,000 subscriptions. ■ On April 1,
MVD News Inc. sells one-year newspaper subscriptions for $72 cash each. Newspapers are delivered daily. The average cost of producing and delivering papers each month is $3 paid in cash at the time of delivery. MVD’s sales activity for the year follows:■ On January 1, 2020, MVD sold 8,000
Muscles Gym Corp. offers a variety of fitness packages to its members: ■ A pay-as-you-go membership for the use of the fitness facilities costing $40 per month ■ A one-year, non-cancellable membership costing $420 per year ■ A two-year, non-cancellable membership costing $720
SST Jetski Corp. has sold motorized watercraft for a number of years. SST includes a three-year warranty on each watercraft they sell. Management estimates that the cost of providing the warranty coverage is 1% of sales in the first year and 2% of sales in each of years two and three. Other facts
Refer to the 2016 financial statements for Canadian Tire Corporation in Appendix C.Required:a. What was the amount of current liabilities reported in Canadian Tire’s financial statements as at December 31, 2016? What was this amount comprised of? Use the same categories that the company reports
Winnipeg Air Corp. offers a customer loyalty program that grants members award miles for each flight taken. Members can redeem the miles, which expire 10 years after issuance, for future flights. Members must redeem 15,000 miles to obtain a return flight within Manitoba under the reward program
Zoebug’s Emporium Inc. rewards its frequent shoppers with gift cards. The premium program awards members one point for every dollar spent. Zoebug’s provides members with a $10 gift card for every 1,000 points redeemed, which can then be used to purchase additional merchandise at Zoebug’s.
Hacker’s Superstore Inc. (HSI) borrowed $4,000,000 on January 1, 2020, at a fixed rate of 4%. The loan was repayable over five years at $898,508 per annum. The loan agreement included various covenants and stipulated that in the event of default the loan became immediately payable on demand. HSI
Stanger Educational Services Corp. sells multimedia presentation systems. In its first year of operations in 2018, the company sold 1,000 units for $5,000 cash each, representing a 25% markup over cost. Stanger provides a one-year parts and labour warranty on each system they sell; the estimated
Halifax Air Shuttle Inc. offers a customer loyalty program that grants members award miles for each flight taken. Members can redeem the miles, which expire five years after issuance, for future flights. Members must redeem 15,000 miles and pay a $100 service charge to obtain a flight under the
It is early in February 2021 and you are conducting the audit of Adventuresome Airlines Ltd.’s 2020 financial statements. Through discussion with Adventuresome’s chief financial officer, you learn of matters that have not yet been incorporated into the 2020 financial statements: ■ In
a. Explain what contingencies are. b. Describe how to account for contingent liabilities. c. Describe how to account for contingent assets.
Discuss the terms “probable,” “possible,” and “remote” in relation to contingencies. In what circumstances are contingencies provided for in the financial statements, and when are they simply.
The following are six independent situations. The underlined entity is the reporting entity. 1. The Supreme Court of Canada ordered a supplier to pay Pangay Strobes Inc. $100,000 for breach of contract. 2. Ynot Pharmaceuticals Inc. sued Xbot Agencies Ltd. for $20 million alleging patent
Aaron Robinson’s Architecture Ltd. (ARAL) is a private company that reports its financial results in accordance with ASPE. Unfortunately, a three-story apartment building that ARAL designed recently collapsed. The owners of the apartment complex are suing ARAL for $10,000,000 in damages. ARAL’s
The following are two independent situations. The underlined entity is the reporting entity. 1. Broken Horse Stables Inc. sued Topnotch Equestrian Inc. for $1 million alleging breach of contract. Topnotch’s legal counsel estimates that Broken Horse’s likelihood of success is about 55%.
ZSK Interiors Ltd. guarantees SIL Exterior Co.’s $150,000 bank loan. Describe how ZSK will initially account for the guarantee and discuss the nature of the required disclosure.
Explain what onerous contracts are and how they are accounted for.
Kaitlyn’s Cats Inc. (KCI) is a chain of pet stores that specializes in the sale and veterinary care of felis catus, more commonly known as domestic cats. On October 1, 2021, KCI raised a net of $523,973 by issuing $500,000 in 10-year, 6% bonds that pay interest on April 1 and October 1. The
Kitchener Distributors Inc. entered into a non-cancellable contract to buy 10,000 litres of linseed oil for $3 per litre for resale purposes. Kitchener intends to resell the oil to retail paint outlets for $4 per litre. The contract was entered into on October 31, 2020, for delivery on January 15,
Waterloo Wholesale Corp. entered into an irrevocable contract to buy 1,000 kilograms of amorphous silica for $40 per kilogram for resale purposes. Waterloo intends to resell the silica to local cosmetic manufacturers for $60 per kilogram. The contract was entered into on November 30, 2020, for
A number of independent situations are set out below. 1. A former employee of Moncton Minimarket Inc. sued the company for $500,000 alleging that the company’s owner sexually harassed her. Moncton’s lawyers suggest that the lawsuit has a 20 to 30% probability of success and that, if
A number of independent situations are set out below. 1. Truro TV Superstore Inc. received 20 52" XZT widescreen televisions from its supplier in New York, shipped on an FOB destination basis. The contract price was US$500 each. The exchange rate on the day of receipt was US$1.00 =

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